A method for comparing returns on taxable corporate bonds and tax-free municipal bonds to determine the higher after-tax return. This helps investors make more informed choices considering their tax brackets.
Bonds are IOUs issued by borrowers to lenders. These instruments come in various forms and are typically used by governments, local authorities, or companies to raise funds, offering fixed or variable interest rates and different terms.
Debt service refers to the cash required in a given period, usually one year, for payments of interest and current maturities of principal on outstanding debt. This includes obligations from mortgage loans, corporate bond issues, and government bonds. Understanding debt service is crucial for assessing the financial stability and repayment ability of an individual or entity.
Equivalent Taxable Yield is a comparison of the taxable yield on a corporate bond with the tax-free yield on a municipal bond. Depending on the tax bracket, an investor's after-tax return may be greater with a municipal bond than with a corporate bond offering a higher interest rate.
Fixed-income investments are financial instruments that provide a fixed rate of return in the form of periodic interest or dividends until maturity.
Evaluation of the credit and investment risk of a securities issue by commercial rating agencies.
The classification of stocks and bonds according to risk, issued by Standard & Poor's Corporation. S&P's ratings range from Investment Grade for low-risk investments to speculative grades for higher-risk investments.
The Yellow Sheets are daily publications issued by the National Quotation Bureau (NQB) that detail the bid and asked prices and the firms making a market in corporate bonds traded in the Over-the-Counter (OTC) market.
